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Insurance planning

In simple terms, Insurance is planning for uncertainties. We normally plan for certainties of life and ignore
uncertainties and unfortunate events. Â Insurance is one of the most important financial topics in today
complex world. Failure to have adequate Â insurance coverage is like putting oneself for Financial burden.
Insurance is nothing but transfer of potential risk to insurance company at a cost. Nothing will make your
business, car, house, family, or self more vulnerable or susceptible to financial strain than a lack of
adequate insurance. However, paying too much for insurance premium can be a financial strain in itself.
Hence insurance should be looked at purely as expenses and premium is paid for risk and not for getting
any returns or any maturity benefit. It should benefit you or your family Â in case of any Â uncertain events.

Many people have a preconceived notion that insurance is just a waste of money,
something that is not necessary. This is not true. Almost everyone needs insurance.
How do you know? If you own anything that cannot be easily replaced without economic
hardship, it should be insured. If your house catches fire, what would you do? If you
became disabled at work, would there still be food on the table? Or, in the worst case,
would your family be able to main the standard of living Â in your absence.? Will your income continue?

These are tough scenarios to imagine, but they happen every day. It is important to understand the
consequences and to be prepared for the worst. Some people tend to think of insurance as a luxury,
but this is not true at all. Insurance is simply a way to avoid an impoverished state.

Like many things in life, the decision to purchase insurance or not is based on a system of risk/reward.
Unfortunately, consumers often look at the reward and ignore the risk altogether. This can impede the process
of making an educated decision. For example, the lottery is a very popular system of risk / reward. In this case,
the risk is generally small, but the reward can be great, making it a popular choice. Gambling in casinos is
another example. In this case, some people become so fixated on the reward that they forget the risk of losing.
Think of insurance as an inverted version of the lottery. The reward (not paying for insurance and therefore saving
an immediate expenditure) is minuscule compared to the possible risk (losing everything you own and being in debt
for the rest of your life). And sadly, the chances of your number coming up in the insurance game are a lot greater
than your chances of winning millions.

Hopefully, you now realize that insurance is a necessary part of today world. So let move on.
There are four questions you should have in mind when you set out to purchase insurance.

What kinds of insurance do I need?

How much of each kind do I need?

Who do I insure from?

How do I get the best deal?

There is also a fifth question that you should continually ask yourself when deciding about your insurance needs.

What happens if Iam not covered?

What really happens if you arena covered, whether its not enough of a particular type of
insurance or none at all? Imagine a scenario and play it out in your head. Will it even affect you?
Can you recover from it at all? We will go through some basic scenarios together and you can decide for yourself.